- September 13, 2014
- Posted by: U.S. Title Records
- Category: Real Estate Post
Real Estate Investment
Benefits of Real Estate Investing or Owner-Carry Financing
Investing in real estate can be a low-risk investment option if managed correctly and because of the nature of the commodity and the rate at which the population is growing. There are many good reasons to investigate the benefits of buying multiple properties.
What is Owner-Carry Financing?
A widely misunderstood option for home financing is known as Owner Will Carry (OWC), or owner financing. In a nutshell, this means that the owner of a house becomes the bank for the prospective buyer. An interested buyer would make a down payment (typically pay 10% of the purchase price) and then apply to the owner to “carry” the balance of the loan. Many owner-carry situations require the buyer to refinance, find a conventional lender within a certain period of time or sell the home again after a set term (typically three to five years). There are many reasons why this model is preferred for real estate investors and buyers, but it is always recommended that both parties speak with an agent, attorney or other specialists to make sure every aspect of the proposition is clear and understood by both parties. In a preferred scenario, the property is owned outright. If there is a mortgage lien on the home, in some instances the buyer can “wrap” the existing mortgage with a new contract. It is highly recommended to have the payments serviced by a title company to ensure that the payments are being properly dispersed to the mortgage company holding the original note and that the property taxes are paid and current.
1. Invest Without Playing the Stock Market
Wall Street is a dangerous place for an amateur investor to play; it is even risky for professionals. For people who understand the value of investing but who do not want to enter into a market with as much risk as to the stock market, real estate is an option. The main benefit of purchasing a property with the express purpose of making money is that the owner retains the physical home or building. This appears to some people more than intangible stocks and bonds.
2. Access to Valuable Assets in Case of Emergency
When it comes to investing, the potential to appreciate wealth is important, but so is liquidity. For people who need assurances that they can liquefy their assets if the need calls, it makes sense to establish a line of credit for any existing equity. If an emergency situation occurs, it is much easier to draw on the line of credit than it might be to sell stocks for a profit in an ever-changing financial circus.
3. Cash Flow
The crux of any investment is the steady flow of positive income. The most successful landlords sometimes discover they are able to retire earlier or pursue a preferred career.
4. Pride of Owning Something Tangible
The much-fabled American Dream is a substantial aspect of the national culture, and one part of the dream is owning land or property. There is a great sense of pride that comes with house ownership, especially when you are able to improve it, increase its value, or use it to help family and friends. There are few other ways to invest that provide the same level of happiness.
5. Tax Advantages
The American tax code is famously complicated, but one thing is clear: The advantages that come with making money through investments. Profits gained from an investment, especially interest, are taxed at a lower rate than other types of income. Purchasing real estate also affords the ability to deduct interest payments from your taxable income.
Alternate Option for Investing in the Real Estate Market
It is important when studying any type of investment to consider the situation from every angle and consider hidden benefits and disadvantages. Many people that own their house outright would not consider owner-financing, but frequently because they do not understand how it works. Investors who seek to purchase several properties may not be able to get a traditional loan from a bank, especially in today’s strict lending climate, and therefore owner-financing – once popular in the 1970s when the economy was suffering – is now the comeback kid. So it’s important to consider that if a buyer requests owner-carry financing, it does not mean the buyer cannot afford to pay the mortgage.
Professional Help for a Successful Real Estate Future
People who are unsure how to get started in the real estate arena should seek the help of professionals in the industry. Whether you need the advice of a title company, brokerage firm, or real estate agent, or attorney, it is often a simple matter seeking advice. Many offices offer free consultations and reasonable fees. There are virtually unlimited resources and helpful forums on the internet for real estate investors.